tv Charlie Rose Bloomberg April 16, 2015 7:00pm-8:01pm EDT
>> from our studios in new york, this is "charlie rose." charlie: hank paulson is here. he is the chairman of the paulson institute at the university of chicago. he has traveled to china more than 100 times. he has built unparalleled relationships with china's most important business and political leaders. he has brought the lessons he learned to this book
"dealing with china: an insider unmasks the new economic superpower." i am pleased to have hank paulson back at this table. hank paulson terrific -- mr. paulson: terrific to be here. charlie: you are thinking about a third book. [laughter] mr. paulson: you and i were joking, when i told wendy i was going to write a second book she said i might date again. [laughter] this wasn't -- the crisis we got to relive emotionally. this was a harder book to write. the crisis was a beginning, a middle, and end. charlie: the thread that runs through it is china. mr. paulson: it is all china. charlie: what is your love of china? what is your interest in china? mr. paulson: i spent the time i spent there today i think
everyone needs to ask themselves where can i make the biggest difference? the history i have their, the relationships that i built it made me really focus on this. this relationship, the u.s. china relationship, is by far are more still important bilateral relationship. i see this becoming more complex and difficult. during the time i've been working with china, china has emerged as a formidable competitor. it is much more active and muscular on the global stage. i think this consensus that china's rise is good for the united states is beginning to break down. people are saying increasingly
why should we be working with china? i look at it and say this is more important than it has ever been. we are going to be competing. there is nothing wrong with healthy competition. we don't want it to devolve into destruction. the important issues i see in the world today, whether they are environmental issues like climate change sustainable growth, peace, combating terrorism, they are easier to meet if we are working with china, more difficult if we are working cross purposes with china. i see a need to recalibrate that relationship but i tell the story, in this book the development of china and the
other thing that keys me coming back is because i found the leaders that i've dealt with to be very pragmatic problem solvers, looking everywhere they can in the world for the best practices and often taking advice. i went and go there if i didn't think it made a difference on the issues that were important to me and i dedicated this to my grandchildren. charlie: it's easy to say now that all the big problems are better off if the united states and china working together. even though they may not agree on nuances and particular solutions, if they are working together they are more like he to raise the possibility of a better outcome. mr. paulson: yes charlie:. and if they don't a less good
outcome. mr. paulson: absolutely. matter of fact, history has shown in the past, when you have an established power and a rising power, they come into conflict. there is nothing inevitable about that. but the mixed of competition and cooperation is going to be determined to a large extent by the choices are leaders make. i think this is very important. the other point i make here is that china is beset today by some colossal challenges. we can make as big of a stake by overestimating china's strength as we can by underestimating their potential. the range of possible outcomes is getting wider.
so again, i see this so often americans say to me, should we be concerned is china going to supplant the united states is the greatest power on earth? what i say to them all the time is we are the greatest power. the only threat is our inability to deal with some of the challenges we have and the things we need to do to restore our economy. don't use china as a scapegoat. if we fix our problems we are going to be the power for a long time. if we don't, we won't. charlie: i want to talk about the three stages. the chapters you outline in this book. this point you already said, you fear we are growing apart.
what is the evidence of that? mr. paulson: it really is the conversations i've had, for instance, there is great concern in the united states by those that we would like to see, including me, the political system continue to open up, and continue to see greater press freedom and freedom of the internet. what we have seen is the leadership at the same time the general secretary what we see is he is working to free up the economy, let the market the decisive. at the same time he is tougher on the internet and more
controls on the political system. there seems to be this paradox, which is disturbing to many americans. but what he sees is a party of a source of stability. i happen to think that is not going to work. charlie: he believes the survival of the party is important to the future of china. mr. paulson: you've got that. he does that, and the challenging use he is working on is rebooting an economy that has run out of steam. dealing with the big political problems he has corruption, a dirty environment, property rights, food security
corruption, all of those things. charlie: he is committed to change. he is committed to change there. he is developing alternative energy sources. there are people who say they worry about a bubble in china. both in terms of overbuilding as they did. do you worry about that economic collapse? they've gone to double-digits to 7.4 economic growth. mr. paulson: i look less at the economic growth number. i look at the source of their growth. you mentioned they need less reliance on exports. they also need less reliance on government investment in infrastructure. what we have seen happen, which is disturbing, is we have seen a
country that doesn't have a municipal finance system that were today. -- that works today. if it doesn't have the revenues they need they take someone's land and salads. they finance it with debt and invest in real estate. debt has grown faster than the economy. that is on the one hand very disturbing. on the other the chinese leaders see this, and they are working to address it. what i look at is not the growth number i look at what they are doing to get that grows. i would press much rather see an economy grow more slowly. i think today, in answer to your question specifically, they've got the capacity they've got the knowledge. it got the tools to address it. but the longer they way in
addressing that problem, the greater the risk when there is a reckoning, there are losses being built up that the government will have to be responsible for. the longer they wait the greater the risk is it spills over and does more damage to the underlying economy. charlie: do you have conversations about the issues you have suggested? human rights issues, issues of the question of freedom? mr. paulson: i've always been able to be very candid as you can see when i write the book. the issues they look to me for our economic issues, the environmental issues. but i tell a story in this book which was to do with one of the few really bright days i had in
the middle of the financial crisis. i didn't have a lot of those. one of those days a week before we needed to step in and put fannie mae and freddie mac and the conservative ship, i was visited by an anti--- pro-democracy activists. he came to see me at treasure with his wife and young children. he came to thank me for what i had done in securing his release a year earlier. what i found is if you make progress with the chinese on the economic issues it is easier to deal with some others. we found common ground that had led to the release. charlie: you could do it case-by-case. mr. paulson: case-by-case and in terms of the broader picture, he has been clear. he said i don't aspire to have
western multiparty democracy. i'm not looking to have western values. he wants a good relationship with the u.s., but this is -- what he does instead right now he is focusing on the things the chinese care most about. the corruption, the environment the property rights, the income disparity. he has done away with the one child policy. as more people move up and become more prosperous, i think they are going have demands that he loosen up. charlie: he's an interesting man. he has written an interesting profile on xi jinping.
the interesting thing about you, you singled him out before he became president and was a province leader. why did you do that? mr. paulson: i tell the story in the book. some people in the government said how did you know? i should have said i'll tell you later. i really didn't know. the reason i singled him out with this. i've been very impressed with him. he was focused on economic reform, and he saw the private sector as being the key to china's future. where he had worked the private sector played a bigger role. i had said to him when i had one of the meetings in the united states, on my next or to china i will come and see you. i was treasury secretary. i've visited him, and i wanted
to do two things. i wanted people in china to know i didn't think the world revolved around beijing, just like i don't think it revolves around new york in the united states. i wanted to emphasize the private sector. they meet with the leader i very much respected. he had a great sense of history. he arranged, we met at west lake . we were photographed under the arch where president nexen met -- president nixon met. he emphasized to me at the same time the current government at that time, there was a 10 year hiatus when there was a lot of reform. there was 10 years where there
wasn't a lot done. now xi jinping has inherited an economy where they have waited almost too long. he is working to get some very difficult reforms done. even though he has consolidated a great deal of power he still doesn't have the consensus he needs to get some of the most difficult things done. charlie: the big issue you point to which can be critical to the future, cyber security. how do we find a way out of that? mr. paulson: that's a top issue. cyber security, people inflated to include all kinds of things. there's the espionage, which governments engage in. we do it, the chinese do it. there happens to be some people use it refer to the internet in
curbing the access to information. i talk about in the context of cyber theft of corporate secrets. i think this is very disturbing. i know very few u.s. companies that haven't had their computer breach. charlie: the argument made is that in the chinese case, the government is engaged in it for the benefit of enterprise. mr. paulson: you get it. many people misunderstand that. i think the reason this is the most divisive economic issue is for two reasons. it plays to being viewed that the chinese are lawless and don't play fair.
it is destructive and economic systems. i don't not how you have an economic system function and china is -- it has these lawless behaviors. china has a big stake in this, also longer-term. i find it very difficult because so many of these issues have been conflated. the u.s. has lost the high ground in this debate globally. i think it is one we have to tackle. the best way to tackle this is on a multilateral basis and the u.s. working with other countries to come up with them. charlie: let me ask you this. what was their reaction to chapter two of this book?
how you handled the incredible recessions out of the crisis in 2008, and did it affect their judgment of the united states? mr. paulson: charlie, i write about this in the book, and yes it did. there was a tremendous lesson there. the lesson is how important it is to preserve u.s. economic strength. what that means to our standing in the world. we need to lead by example, in addition to doing things. the story i tell, i write a whole chapter about the financial crisis through the u.s. china relationship. they were very supportive. some of the relationships i had made a difference. in june of 2008 when i was
pressing them to open their markets, he looked at me and said hank you have made my life difficult, you used to be my teacher. my teacher doesn't seem so smart anymore. i can give him all the points i had about the mistakes, or the cleanup program, but we need to maintain our string, keep our economic competitiveness. everything starts there. charlie: you are beginning to see a certain sins of initiative by them. i'm thinking of the asian infrastructure investment bank. we are not so enthusiastic. then you found the rest of the world agreed to participate, and then we come along after that, suggesting the chinese have their own initiatives to play a bigger role, whether it has to
do with reserve currency, or has to do with this kind of bank or world institution. mr. paulson: we will to a large extent bring them into these global systems. xi jinping view is he is not waiting for the world to declare them a major power. he is acting like one. just like every other power before him has. like the united states did. i think they received that issue a huge focus from their press, a watershed event. the u.s. government has a lot of things right. that one we didn't get right. china is the leader in infrastructure and finance.
we should have said we want to work with you and figure out how to be helpful. charlie: what are you recommending we do to make the relationship better? mr. paulson: i think that the most important thing we could do is to get tangible things done where we have a common interest and where both populations can see the value of the relationship. the climate deal was a good example of that. i happen to think the most important thing we can do now is a bilateral investment treaty. we are negotiating this with china. this does two things. it helps the chinese reformers open up their markets. it can be a leverage. it is going to benefit u.s. companies. it is going to benefit workers
he is the founder of "dealing with china: an insider unmasks the new economic superpower." wynn resorts. a decade later he finished the when las vegas and encore. the company has pivoted east. i am pleased to have steve wynn back at this table. welcome. in the interest of self disclosure he has been a friend of mine and a supporter from a long time ago. one of the things you identify with our big ideas. you change las vegas because you have big ideas. you sought as a place where people come for entertainment. as well as gambling. you saw the move to china. we have created ideas for what a
facility ought to be about. big ideas are a hallmark. you believe there are -- they are essential not only to companies, but to the country and to progress in science and everything else. steve: i do. as we build these hotels, each one of them successfully has broken all previous records of gaming revenue for a hotel that existed before it. caesars had the record. garage broken. -- garagemirage broke it. wynn and encore did 800. in each of those examples never was casino revenue as much as
half of the revenue. it was always more money and non-casino revenue regardless. last year, $870 million casino revenue. charlie: what do we mean? steve: hotels, spas, shopping, entertainment. restaurants. those relationships are possible. there is a slot machine and above it everywhere. you can be in a gambling room within an hour and a half. a gambler devise has no intrinsic power. it is a source of revenue if the place is populated by people who like that sort of thing read what brings people is something else. a fanciful environment. a chance to eat, and shop, to
has fun and be well served. these fancy buildings like most institutions are what they are the day they open. that is 10% of the franchise going forward. what makes a place in during is people. -- enduring his people. charlie: what's the most important thing happening in las vegas today? i see a lot of emphasis on nightclubs. steve: your show about hamilton was all about hip-hop. the changing tastes musically and cultural expression generation to generation. so are the nightclubs with the disc jockeys, the wonderful guys like david togethguetta, and nightclubs have always been a mating dance. the more things change the more
they stay the same. charlie: how is it different from las vegas? steve: discounting politics, in terms of the motivation of the visitor and the experiential aspiration they have, they are exactly the same as america. people come to live big and have excitement and if they like to gamble, and test lady luck, so the people, you get on an airplane and fly, you get off the plane, and you are home again. mcdonald's, colonel sanders. my grandparents came to this country just before the turn of the last century. charlie: came from? mr. paulson:
-- steve: russia, poland. they took whatever job they could get in the eastern cities. they started to have children before world war i. my parents were born in 1916. they never saw a good day. they came of age in the great depression. if they didn't go to war they had defense jobs. they came out of order were to in their 30's into one of the great periods of expansion. what is amazing is these people who had never seen a good day believe that anything was possible in america if their cake get a better education of banned them maybe even the president of the united states. it was founded on a mystical
belief and opportunities here. we noticed during that generation they all had a pent-up demand for the good life. the cadillac, a copacabana. the desire for the good life is a significant feature of first-generation well. when people make the first book in -- buck and their families history they have a very different attitude towards their disposable income. in china, today, all of this is first-generation well or early second generation. what we're seeing in china is not a genetic predisposition to gamble. what we're seeing in china is the same thing we saw. my father and my former wife's
father were both gamblers. they loved to bet on baseball and football, and go to a casino. it is part of that first generation of success profile. that is still going on. charlie: you mentioned you lane, your wife who you married and divorced. she helped you very much in building wynn. there is a fight about membership on the board. in the interests of news, where does that stand? steve: where it stands is that my company is controlled really by outside directors. there are seven members of the board. they decide what the slate of directors are to be when there
is an election every year at the annual meeting. and there are proxy statements the board is required to issue statements on why they change or make selections. they file proxy statements. i didn't happen to agree with them. nevertheless -- charlie: in terms of the slate. steve: i did not. i'm in an impossibly embarrassing position. not supporting my former wife, which i'm happy to do and obliged to do or not supporting my board of directors, who are all there he fine, highly respected him independent men. charlie: friends of yours. steve: i've known most of them former governor margaret robert
miller, chairman of the university of pennsylvania our shoemaker, and first boston corps. every one of these men are highly regarded. on this particular issue i have recused myself, made public my opinion, and i'm not commenting on any of this sort of thing as i have nothing constructive to add to the conversation other that it is an uncomfortable position to be in. ♪
charlie: let me talk about a couple of other things. and back to big ideas and politics. it is the 100th anniversary of frank sinatra. you were his friend. yes. steve: yes. charlie: tell me the man you knew. steve: sinatra was a fascinating gentleman. everybody knows because of the specials that have been done how he became frank sinatra. what was interesting is this was a fellow professionally, and that was my relationship with him he performed quarter after quarter for five years, i was fascinated i sinatra's
dedication to excellence. when it came to his craft, the selection of songs, the relationship with the orchestra his vocal presentation, he was a man of meticulous pursuit of excellence. he had a tremendous respect for his audience for his customers. frank sinatra was a normal man with normal emotions and temperaments like any artist. when it came to being on stage keeper hearst, even a in the 1960's. his selection i have the privilege of watching him do the song list. we had a routine. we are having lunch. he carried a briefcase. in it, the lyrics of all the songs. he would take out a stack while
he was eating the chicken salad sandwich and he would start leafing through them. yes, no, maybe. here is september song. new york, new york. my way, no. one for my baby, maybe. luck be a lady, no. i was sitting next to him, and i reached out and picked up luck be a lady. how could you not seeing it? he slept my head and said don't, don't ever touch the music. nobody interferes with the playlist. don't speak. he said, don't say a word with a twinkle in his eye. he'd say what are you? a pest? don't.
he has the blue eyes twinkling. don't ever touch the music. he puts it in the maybe. this began a routine that lasted for five years. he would wait until we had lunch. i had to pick him up and take him home. in later years, dean martin joined us. i would have these weekends with frank sinatra and dean martin on the plane 10 hours. we had this little choreography that became a family thing, where after lunch he would take out the music and he would take out luck be a lady and rattle it in my face. we would play it on the fountains. some of the most wonderful memories of being with sinatra.
the thing that i think of professionally is and how dedicated he was to the audience , and to his trade. it was -- i also have a vision problem. i don't see well in the dark. backstage he would take my hand in case i couldn't see a step. as time went by he had an apartment and i would stay there. we went to lunch once on lexington avenue. the hotels at 51st, it was a beautiful avenue. let's walk back. he said ok. i hope we don't get [inaudible] charlie, he took my hand like i was three years old. i was walking down park avenue with frank sinatra holding my
hand. i was 42 years old. i loved it. people turned around and looked at us. it was such fun. [laughter] he doted on dean martin. he loved him. frank sinatra loved comedians. he wasn't a guy that can tell a joke himself. when it came to funny guys whether it was red buttons, dean martin was a naturally funny guy. he said funny things off the cuff. sinatra would egg on martin. tell steve what happened when we were doing this movie, or that thing. martin would tell the stories. he was a laid-back, great guy. you can see the affection sinatra had. they were noncompetitive personalities. sinatra was the alpha dean was
his own god. charlie: no one has had a voice like him. steve: there are some great voices and singers. but frank brought something. i remember one night in connecticut we did a customer party. we used to go around and do parties with our customers. he and i would take pictures with everybody. we walked into this place near fall river. it is one of those places you could get married. our group of 150 customers and their wives were in the middle hall. on the left there was an event for the brownies, the cub scouts. they had roped off the halls of they would not interfere with us. we came through the door on a frigid january evening, and all of these kids were lined up and
sinatra came through the door, and they started screaming. sinatra was a little stunned. he said this is marvelous. they were younger than his grandchildren. he started picking up the kids. the guys would behave like children and say frank, i love you. we go around table to table. charlie: let me talk about the country. steve: we could do this all night. charlie: we could. you are a republican? steve: i have been both. lately i have been to the right of the president. charlie: some of your friends worry -- steve: they probably haven't discussed it with me. i certainly was a keynote speaker at the republican state convention several years ago. in nevada and reno. i did my remarks and i said my wife and my two daughters would
never have an abortion but they believe it is a woman's right to choose. the reason i'm here today is because my buildings have been highly celebrated. that is because of my collaboration with a man and others who are gay. my question is, because i know that citizenship and sexual preference or unrelated i have to ask the question, is the elephant's back big enough for my friends and daughters? and i got a standing ovation. i have a mixed political ideology or approach. but i don't think that is so important, as today we are looking for strategic answers. how do we make the country better? where is it, everybody has the rhetoric down dandy. what we are short on our specific ideas that lead to change that all people would consider positive.
we know in the history of mankind the only thing that is ever crated the better life for human beings is the demand for their labor. we haven't been around in volume except the last 10,000 years and we went since agriculture was invented from a few hundred thousand humans to almost 7 billion. the demand for labor gives us a better life lest amand, less better life. until there is no demand and we starve. what is the role of government? to make, to create an environment where people can have a better life. with that thought, as a society the most powerful thing that we give to each other in the form of government to the exclusion of all other things, is the right to tax. we agreed to let someone else in a group take our money by
mandatory means of necessary, in taxation. i have noticed a trend in america for the last several decades, more and more, to use the power of taxation as a punishment, a penalty. instead of as a reward. we know for example, things that are too big to punish, you can't punish an elephant or a dolphin you can only positively reward. we positively reinforce things to get the right behavior. for example, considering the power to taxation to be the greatest single weapon the government has, i'm talking about this one element for a moment, let's take two things that are in the public mind these days. education and health care are two big ones. we don't think your kids are being educated enough.
we want to do it better. we don't think health care can be if the expense that it is in america. we want to make it better. let's take a look at what is going on right now. we grouse about teachers unions. we say they are an obstacle to progress. the fact of the matter is you can bring like a mule at the moon about unions, but people have a right to get together and form a union. there are good ones and bad ones. charlie: you have unions? steve: never had a grievance in 40 years. good unions, bad unions, but it is not the governments ' business. what's interesting is, this is my notion to put this and concrete strategy, if i were president of the united states and i had the speaker majority leader with me, we are want to announce this program tomorrow i'm point is say that in each and every pta organization and
school board in america, they develop their own test of what they think it is, the third grader should learn about adding, subtracting, multiplication, spelling. the school and the parents get together and decide what represents a successful third-degree education. this would be true of every grade but let's just pick the third grade. if the teachers in that school get 80% of their students to pass that test, we will get those teachers on a joint tax return for the spouse and teacher $75,000 in tax-free income. if 95% of students passed the test, we will take that tax-free income to $90,000. you have immediately given every teacher a 20% raise. you have caused a bunch of kids in college to change their curriculum. you have sidestepped the unions. the unions are the protector for
a better life for the teacher. naturally, people go for their own self interest and cuddle up to a union. you would come and i would. the minute you make the kids getting a satisfactory test result by local standards a chance to make more money for me, the teacher, excellence becomes the order of the day. the teacher goes for the prize, for the carrot. if the government's strongest weapon is the power to tax sometimes the greatest exercise of power is in the restraint of its use. the restraint of the tax collecting power can be the greatest carrot the government has to get socially desirable behavior. let's take health care. a strategic conversation. we know third-party payers when you get your insurance from your employer, or from the union or
from the government, you don't give a damn what it costs for your doctor as long as you don't have to pay for it. the idea that a third party is paying it leads to a very different mindset between a patient and doctor. every expert has studied the subject that has said if we get people to have a 1-1 relationship economically and personally with their doctor the world would change. i would say this. let's say that a man and woman have a joint income of $100,000 in their taxes $20,000. let's say the tax bill for this man and wife is 20 grand. we say tell you what, you could take $4000 a year or $3000 a year of that tax money, you don't have to pay it uncle sam.
but in a health savings account. by an umbrella policy that is cheap to cover catastrophic events, and the rest you can administer yourself and pay your doctor one-on-one. the minute you say that after you have established a certain minimum level in that account, you can have the rest of it to spend as you wish, right out of the tax bill, you will immediately change the relationship with people with their pharmacists, their doctors. you incentivize the behavior you know is constructive. we don't -- the affordable health care act. you don't do what we want, you pay a penalty. we punish you. charlie: you don't think punishment is a better idea. let me turn to other things before i go. steve: one more thing. energy policy. american strategic role in the geopolitical role would be dramatically affected positively
if the president of the united states and congress decided we were going to go on a rampage towards exploitation and development of all of our oil and gas reserves. paulson was here talking to you. what can we do to strengthen our relationship with china? the concept comes into play. you do it by making their life better. if we became a big exporter of gas and oil we would undercut our enemies. we would give pause to mr. putin , we would become a co-supplier to europe. we would also, because we could export oil, lower the price of oil undermine our enemies in the mideast, and become a friend to china because they don't have our natural resources. we would be lightning their load -- lightening their load.
between canada, mexico, and the united states we could have a north american petroleum export group that is bigger than opec. charlie: that is all true. at the same time you know that there are a lot of people in the country who are worried about climate change, and they believed that fossil fuels have contributed the assault on the environment. that is another debate. that is the argument. steve: the ice bridge melted. climate change has been going on a long time. we are talking about how to make a geopolitical change to reinforce or establish -- charlie: a relationship with china. steve: and everybody else. charlie: leverage that in order to -- steve: it changes the world. charlie: thank you for coming. it is a pleasure to have you.
your sense of pursuit of excellence is remarkable and it has been a part of who you are for a long time. in terms of so many areas of life, and medical developments, as well as great art, and building a great company. all of those things in terms of your love of art has been something to the much admired. steve: thank you. charlie: steve wynn thank you for joining us. see you next time. ♪
john: "with all due respect," the only flying vehicle we care about today is the millennium falcon. happy national eggs benedict day. hillary clinton and the way she courts. on monday, she is headed to new hampshire. rachel maddow is demanding more specificity of hillary on policy. bill de blasio still will not endorse her. bernie sanders is all over her.